20 Second Advisor: Should I invest globally?
With US stocks outperforming non-US stocks in recent years, some investors have again turned their attention towards the role that global diversification plays in their portfolios.
While non-US equities have recently delivered disappointing results, it is important to remember that investing globally provides valuable diversification benefits.
Have a look at the chart below. We see that investors who had exposure to other areas of the global landscape were rewarded with positive returns. Cumulative performance from January 2000 – December 2019 reflects the benefits of having a globally diversified portfolio, especially a portfolio that targets areas of the market with higher expected returns. Longer time frames increase the likelihood of having a positive investment experience.
| Total Cumulative Return (%)2 | 2000-2009 | 2010-2019 | 2000-2019 |
| S&P 500 Index | -9.10 | 256.66 | 224.33 |
| MSCI World ex USA Index (net div.) | 17.47 | 67.89 | 97.22 |
| MSCI World ex USA Value Index (net div.) | 48.71 | 48.79 | 121.27 |
| MSCI World ex USA Small Cap Index (net div.) | 94.33 | 116.76 | 321.24 |
| MSCI Emerging Markets Index (net div.) | 154.28 | 43.50 | 264.91 |
| MSCI Emerging Markets Value Index (net div.) | 212.72 | 22.83 | 284.13 |
Diversification neither assures a profit nor guarantees against loss in a declining market.